In re: WARFARIN SODIUM ANTITRUST LITIGATION
Seymour Eagel, Appellant in No. 02-3603
Willie Hutchinson, Jr.; Vincent Palazzola; Alex Galperin; Shirley Bruce; Madison W. O'Kelly, Jr.; Garey L. McCarty, Appellants in No. 02-3755
Alan Shapiro, Appellant in No. 02-3757
Mary Cleusman, Appellant in No. 02-3758.
No. 02-3603.
No. 02-3755.
No. 02-3757.
No. 02-3758.
United States Court of Appeals, Third Circuit.
Argued October 29, 2003.
Filed December 8, 2004.
COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Paul D. Wexler (Argued), Bragar Wexler Eagel & Morgenstern, LLP, New York, NY, for Appellant Seymour Eagel.
Jeffrey S. Friedman, Silverman & McDonald, Wilmington, DE, Edward Cochran (Argued), Shaker Heights, OH, Hilton F. Tomlinson, Pritchard, McCall & Jones, LLC, Birmingham, AL, Paul Rothstein, Gainesville, FL, N. Albert Bacharach, Jr., Gainesville, FL, Robert W. Bishop, Bishop & Associates, Louisville, KY, for Appellants Willie Hutchinson, Jr., Vincent Palazzola; Alex Galperin; Shirley Bruce; Madison W. O'Kelly, Jr.; Garey L. McCarty.
John J. Pentz (Argued), Maynard, for Appellant Alan Shapiro.
J. Arnold Fitzgerald, Andrew F. Tucker (Argued), Dayton, TN, Sidney Balick, Balick & Balick, Wilmington, DE, for Appellant Mary Cleusman.
Bernard Persky (Argued), Barbara J. Hart, Vaishali Shetty, Goodkind Labaton Rudoff & Sucharow LLP, New York, NY, for Appellees John Kusnerick, et al.; Sara Altman; Samuel Gordon Tischler; Marie A. Steckel; Robert Bareiss; John Civatte, Jr.; Mary Banten; Arkansas Carpenters' Health & Welfare Fund; Operating Engineers Local 312 Health & Welfare Fund; United Food and Commercial Union and Employers Midwest Health Benefits Fund; United Wisconsin Services, Inc., now known as Cobalt Corporation; Louisiana Health Service and Indemnity Corporation doing business as Blue Cross and Blue Shield of Louisiana.
William R. Kane, Miller, Faucher and Cafferty, Philadelphia, PA, Alan H. Rolnick, Hanzman & Criden, Coral Gables, FL, Marvin A. Miller and Jennifer W. Sprengel, Miller, Faucher and Cafferty LLP, Chicago, IL, for Appellees John Kusnerick, et al.; Sara Altman; Samuel Gordon Tischler; Marie A. Steckel; Arkansаs Carpenters' Health & Welfare Fund; Operating Engineers Local 312 Health & Welfare Fund; United Food and Commercial Union and Employers Midwest Health Benefits Fund; United Wisconsin Services, Inc., now known as Cobalt Corporation; Louisiana Health Service and Indemnity Corporation doing business as Blue Cross and Blue Shield of Louisiana.
Pamela S. Tikellis, Chimicles & Tikellis, Wilmington, DE, for Appellees John Kusnerick, et al.; Sara Altman; Samuel Gordon Tischler; Marie A. Steckel; Robert Bareiss; John Civatte, Jr. Mary Banten.
Richard W. Cohen (Argued), Lowey, Dannenberg, Bemporad & Selinger, White Plains, NY, for Appellee United Wisconsin Services, Inc., now known as Cobalt Corporation.
Donald J. Wolfe, Jr., Potter, Anderson & Corroon, Wilmington, DE, George D. Ruttinger (Argued), Crowell & Moring, Washington, DC, for Appellee Dupont Pharmaceutical Company.
Before SCIRICA, Chief Judge, FUENTES, and SMITH, Circuit Judges.
OPINION OF THE COURT
FUENTES, Circuit Judge.
This matter arises out of a consolidated class action suit seeking injunctive and monetary relief in connection with the sale of Coumadin, the brand name for the prescription drug warfarin sodium manufactured and marketed by the DuPont Pharmaceuticals Company ("DuPont").1 Plaintiffs allege that DuPont's anticompetitive behavior and dissemination of false and misleading information about a lower-priced, readily available generic competitor caused them to purchase the higher-priced Coumadin instead of the generic product. At issue in this appeal is whether the District Court abused its discretion in approving a $44.5 million nationwide settlement agreement bеtween DuPont and the fixed co-pay consumers and out-of-pocket consumers (collectively, the "consumers") and Third Party Payors ("TPPs") of Coumadin, and awarding $10 million in fees to class counsel.2 Several individual consumers and TPPs challenge the District Court's certification of the class and approval of the settlement. For the reasons discussed below, we conclude that the District Court did not abuse its discretion in certifying the class or in approving the settlement, and accordingly we will affirm the judgment of the District Court.
I. BACKGROUND
A. Factual History
Warfarin sodium is a prescription oral anticoagulant medication sold in tablet form that is taken by more than 2 million Americans to treat blood-clotting disorders. DuPont has been the dominant manufacturer and supplier of warfarin sodium under the brand name Coumadin, recording sales of approximately $550 million and $464 million, respectively, in 1998 and 1999. Although DuPont's Coumadin patent expired in 1962, Coumadin remained the only warfarin sodium product available until July 1997, when a generic version of warfarin sodium was released onto the market following approval by the U.S. Food and Drug Administration ("FDA"). Class action plaintiffs have alleged that DuPont, in response to the competition from lower-priced generic warfarin sodium, disseminated false and misleading information to consumers, TPPs, and others about the safety and equivalence of generic warfarin sodium. As a result, plaintiffs allege that DuPont's campaign of misrepresentations and omissions caused consumers and TPPs to buy higher-priced, brand name Coumadin instead of the lower-priced generic warfarin sodium.
DuPont's alleged violations are said to have begun when Barr Laboratories, Inc. ("Barr") filed a petition with the FDA in May 1995 seeking approval to manufacture and distribute a generic warfarin sodium product. In response to Barr's petition, DuPont filed a petition for stay with the FDA in October 1996 requesting that the FDA adopt stricter bioequivalence standards and postpone approval for all generic warfarin sodium products. The FDA denied DuPont's petition, however, on the grounds that the methods in place for determining bioequivalence were sufficient. At the same time, DuPont filed a petition with the U.S. Pharmacopeial Convention, Inc. ("USP") requesting the adoption of Coumadin's content uniformity specifications as the industry standard for warfarin sodium drugs. The USP rejected this petition.
In March 1997, the FDA approved a generic warfarin sodium, finding that it was the bioequivalent and therapeutic equivalent to Coumadin.3 The generic product was released to the market on July 26, 1997 at prices substantially lower than Coumadin. Plaintiffs allege that DuPont, in the period before and after Barr's introduction of generic warfarin sodium, published false and misleading statements concerning the bioequivalence, therapeutic safety, and efficacy of generic warfarin sodium. For instance, DuPont allegedly issued a variety of false and misleading communications to convince health care professionals, government agencies, and the public that Coumadin was safer and more effective than Barr's generic warfarin sodium product. In addition, DuPont allegedly revised its promotional computer software system designed for health care practitioners monitoring patients using Coumadin to include warnings about switching to generic substitutes, and created a slide presentation for health care professionals claiming that the generic drug may not be the equivalent to Coumadin.
DuPont also allegedly ran a publicity campaign claiming that Coumadin had tighter than USP content uniformity standards. DuPont issued a press release, which stated that patients should receive additional blood tests if switched to generic warfarin sodium and accused Barr of focusing on producing a cheaper product to save money while DuPont focused on patient safety and education. Furthermore, DuPont allegedly created an organization named the Health Alliance for NTI Patient Safety for the purpose of lobbying state legislatures, formularies, and pharmacy boards to exclude NTI drugs from state generic substitution laws.4
Plaintiffs assert that the misrepresentations led consumers, TPPs, and others to believe that Coumadin was superior to the generic equivalents, caused millions of prescriptions to be filled with Coumadin that could have been filled with less expensive generic drugs, and allowed DuPont to maintain supracompetitive prices for Coumadin. As evidence that DuPont's misrepresentations and conduct had an anticompetitive effect, plaintiffs cited evidence of the weak market penetration of generic warfarin sodium as compared to Coumadin. Generally, about 40-70% of prescriptions for drugs available from multiple sources are filled with less expensive generic products within one year of generic availability. However, more than 75% of prescriptions for sodium warfarin were still filled with Coumadin a year after Barr introduced its generic version, and DuPont continued to maintain a 67% market share up until the date the complaints in this matter were filed.
B. Procedural History
Beginning in 1997, class action complaints were filed in several federal district courts and were consolidated for pretrial proceedings by the Judicial Panel on Multidistrict Litigation ("MDL panel") before the U.S. District Court for the District of Delaware. The class actions sought treble damages and injunctive relief under federal antitrust laws on behalf of a nationwide class of consumer and TPP purchasers of Coumadin who paid all or part of the purchase price. In an order dated December 7, 1998, the District Court dismissed the claims on the grounds that consumer plaintiffs, as indirect purchasers of Coumadin, lacked standing to seek injunctive relief and treble damages under the Sherman Act. See In re: Warfarin Sodium Antitrust Litig., C.A. No. MDL 98-1232-SLR,
Following our decision, several additional class actions were filed in Delaware District Court as well as other federal courts by TPP plaintiffs and a state medicaid agency and were transferred to the Delaware District Court as tag-along actions pursuant to the order of the MDL panel. After discussions among counsel, the parties negotiated and drafted a pretrial case management order ("CMO"), which the District Court entered on February 22, 2001. The CMO established a plaintiffs' Executive Committee, established procedures for conducting settlement discussions, and specified when and how to file a consolidated class action complaint.
A consolidated class action complaint was filed in the District Court on March 30, 2001 by consumers and TPPs on behalf of all similarly situated U.S. consumers who purchased Coumadin at supracompetitive prices and all similarly situated U.S. TPPs who paid for the fulfillment of Coumadin prescriptions for their members or their insureds at supracompetitive prices beginning in July 1997. Plaintiffs sought an injunction and other equitable relief under § 16 of the Clayton Act, 15 U.S.C. § 26,5 to remedy DuPont's violation of the federal antitrust laws, particularly § 2 of the Sherman Act, 15 U.S.C. § 2.6 On behalf of all TPPs, plaintiffs sought treble damages pursuant to § 4 of the Clayton Act, 15 U.S.C. § 15.7 Plaintiffs also alleged violations of the Delaware Consumer Fraud Act, 6 Del.C. § 2513; the consumer fraud and deceptive acts and practices statutes of all fifty states and the District of Columbia; and the antitrust statutes8 of the "indirect purchaser" states. Finally, plaintiffs alleged tortious interference with TPPs' contracts with health benefit plan members and pharmacies relating to the substitution of generic warfarin sodium and alleged unjust enrichment under the laws of all fifty states and the District of Columbia. The state actions that are still pending are included in the proposed settlement.
C. Settlement Negotiations and Agreement
Pursuant to the CMO, co-chairs of the Executive Committee had primary responsibility for submitting motions to the District Court, engaging in discovery, conducting negotiations with DuPont, and acting as the spokesperson for the plaintiffs at pretrial conferences. Any settlement discussions had to be attended by аt least one of the co-chairs, one consumer representative, and one TPP representative, and no settlement offer could be made or accepted without the prior consent of all consumer and TPP representatives on the committee.
Settlement negotiations in the federal actions began in March 2000 and continued through the next year. The parties reached an oral agreement on the basic terms of the proposed settlement on April 19, 2001, executed a memorandum of understanding on May 14, 2001, and entered into a Stipulation of Settlement and Compromise on July 26, 2001.
Under the proposed settlement, DuPont would pay, for settlement purposes only, $44.5 million to settle the claims of the following proposed class:
All consumers or Third Party Payors in the United States who purchased and/or paid all or part of the purchase price of Coumadin dispensed pursuant to prescriptions in the United States during the period March 1, 1997 through and including August 1, 2001 ("Class Period"). Excluded from the Class are Defendant and any of its officers and directors and any governmental entity. "Third Party Payor" shall mean any non-governmental entity that is (i) a party to a contract, issuer of a policy, or sponsor of a plan, which contract, policy or plan provides prescription drug covеrage to natural persons, and is also (ii) at risk, pursuant to such contract, policy or plan, to provide prescription drug benefits or to pay or reimburse all or part of the cost of prescription drugs dispensed to natural persons covered by such contract policy or plan.
Upon final approval of the settlement, all pending actions against DuPont arising from its alleged unlawful marketing and sale of Coumadin, i.e., both federal MDL proceedings and related state actions, would be dismissed. DuPont has already paid the $44.5 million into an escrow account which is earning interest for the benefit of the class.
Under the allocation and distribution plan, the Net Settlement Fund ("NSF") is to be distributed to class members who filed a proof of claim on or before April 30, 2002.9 The recognized loss for each class member will be total payments made for Coumadin (less the amounts received for reimbursements, discounts, or rebates) multiplied by 15%. Eighteen percent of the NSF is to be set aside for a "Preferential Fund" out of which the recognized losses of consumers will be paid first. If the recognized losses of consumer claimants are fully satisfied from the Preferential Fund, the unexpended portion will be added to the NSF for payment of the recognized losses of the TPPs. If instead consumer losses are not fully satisfied, the unsаtisfied amounts will be paid out of the remainder of the NSF on a pro-rata basis with TPP claimants.
On August 1, 2001, the District Court granted preliminary approval of the settlement and conditionally certified the settlement class. The order approved the plan for providing notice to class members about the settlement terms. In addition, the District Court required any class member who wanted to opt-out of the class, or who wished to object to the proposed settlement but not opt-out of the class, to do so by December 17, 2001.
D. Notice to Class Members and Response to Proposed Settlement
Plaintiffs contracted with Complete Claim Solutions, Inc. ("CCS"), a nationally recognized settlement administrator, to prepare and implement a notice program. CCS published notices targeted at both TPP and consumer class-members; set up a call-center to receive telephone inquiries; prepared, printed, and distributed notice packets for consumers and TPPs who responded to the notice; and designed and developed a website for class members to review and access information about the settlement. Summary notice of the proposed settlement was published over a period of three months beginning in August 2001 in selected publications across the country including USA Today, USA Weekend, and Parade Magazine, as well as Modern Maturity and Readers Digest, in an effort to rеach users of Coumadin who are generally over the age of 50. The publications had a combined circulation of approximately 115 million people. The notice was also published in National Underwriter and Benefits and Compensation Solutions.
The summary notice informed class members that a settlement on behalf of the class had been proposed. To make a claim, consumers were required to submit a form, available on the website set up by CCS, containing certain identifying information and proof concerning their use of Coumadin. By January 2002, there had been over 89,000 telephone inquiries made, over 41,803 visits to the websites and 15,127 forms viewed and/or downloaded. An additional 7,273 requests for printed notice packets were received via email. Through June 3, 2002, the administrator had mailed claim forms to 90,926 potential consumer class members and received and processed 48,305 consumer claims and 1,055 TPP claims.
The claims submitted by consumer class members who filed proof of claim on or before the April 30, 2002 deadline totaled $4.3 million (well within the 18% set aside for them in the Preferential Fund). Attorneys' fees and expenses were awarded to counsel for the consumers and the TPPs in the aggregate amount of $10.8 million. Approximately $2.2 was spent on notice and administration. This left $27.2 million in the fund for compensation of TPPs. In addition, by the December 17, 2001 opt-out and objectiоn deadline, a total of 136 consumers and 10 TPPs had opted out of the proposed settlement while 11 individual consumers and consumer groups and two TPPs had filed objections.
Oral arguments by plaintiffs' and objectors' counsel were presented at a fairness hearing held on January 23, 2002. On August 30, 2002, the District Court issued an extensive and detailed Memorandum Opinion and Order ("Final Approval Order") certifying the settlement class, approving the settlement, and dismissing the contentions made by the objectors. Nine of the consumer objectors now appeal the Final Approval Order. Cleusman, Shapiro, and Eagel filed individual appeals, while Hutchinson, Palazzola, Galperin, Bruce, O'Kelley, and McCarthy (collectively, "Hutchinson") filed a joint appeal.
II. DISCUSSION
We review the decision of the District Court to certify the class and approve the settlement under an abuse of discretion standard. See In re Cendant Corp. Litig.,
A. Class Certification
To be certified, a class must satisfy the four threshold requirements of Federal Rule of Civil Procedure 23(a): (1) numerosity (a "class [so large] that joinder of all members is impracticable"); (2) commonality ("questions of law or fact common to the class"); (3) typicality (named parties' claims or defenses "are typical ... of the class"); and (4) adequacy of representation (representatives "will fairly and adequately protect the interests of the class"). See also Amchem Prods., Inc. v. Windsor,
Appellants allege several errors in the District Court's certification decision. First, Appellants argue that the Rule 23(a) commonality and Rule 23(b)(3) predominance requirements were not satisfied in this case because of variations in the claims and injuries of the plaintiffs, specifically between and among the consumers and TPPs, as well as differences in the laws of the 50 states which form the basis of several of the class' claims. Appellants also argue that the certified class does not satisfy the Rule 23(a) requirement of adequacy of representation because of the existence of intra-class conflicts of interest, which rendered class counsel unable to represent the interests of a single class. After reviewing Appellants' arguments, and for the reasons discussed below, we find that the District Court did not abuse its discretion in certifying a single nationwide class of consumers and TPPs.10
1. Commonality and Predominance
Rule 23(a)(2)'s commonality element requires that the proposed class members share at least one question of fact or law in common with each other. See Baby Neal ex. rel. Kanter v. Casey,
As the Supreme Court noted in Amchem,"[p]redominance is a test readily met in cеrtain cases alleging consumer [] fraud or violations of the antitrust laws." Amchem,
Moreover, proof of liability for DuPont's conduct under § 2 of the Sherman Act and the Delaware Consumer Fraud statute depends on evidence which is common to the class members, such as evidence that DuPont made misrepresentations about Coumadin and generic warfarin sodium permitting DuPont to monopolize the market for warfarin sodium and charge supracompetitive prices for Coumadin, while discouraging class members to purchase the lower-priced generic competitor.11 In other words, while liability depends on the conduct of DuPont, and whether it conducted a nationwide campaign of misrepresentation and deception, it does not depend on the conduct of individual class members. See In re Flat Glass Antitrust Litig.,
Appellants raise several objections to the District Court's finding that the certified class satisfies the commonality and predominance requirements. We consider each in turn.
First, several Appellants argue that the District Court erred when it certified a single nationwide class of plaintiffs because variations in and inconsistencies between the state consumer fraud and antitrust laws of the fifty states defeat the commonality and predominance requirements of Rule 23. Appellants rely principally on the Seventh Circuit's decision in In re Bridgestone/Firestone Inc.,
The difference is key. In certification of litigation classes for claims arising under the laws of the fifty states, we have previously noted that the district court must determine whether variations in state laws present the types of insuperable obstacles which render class action litigation unmanageable. See Prudential,
Nonetheless, we recognize that problems beyond those of just manageability may exist when a district court is asked to certify a single nationwide class action suit, even for settlement purposes, when claims arise under the substantive laws of the fifty states. Although there may be situations where variations in state laws are so significant so as to defeаt commonality and predominance even in a settlement class certification, this is not such a case. We agree with the District Court that the fact that there may be variations in the rights and remedies available to injured class members under the various laws of the fifty states in this matter does not defeat commonality and predominance. In Prudential, we noted that a "finding of commonality does not require that all class members share identical claims,"
Turning to the next argument, several Appellants object to the certification of a single, nationwide class because certain class members may be eligible for treble damages or punitive damages under their state antitrust laws, while other class members, such as those from Tennessee, may be eligible for "full consideration" damаges. Under a "full consideration" statute, a consumer can recover the full purchase price paid, as opposed to receiving reimbursement of only the overcharges. As we explained above, however, we cannot say that the District Court abused its discretion in finding that such variations in state law rights and remedies were insufficient to defeat commonality and predominance.12 In any event, we agree with the District Court that any material variations could be considered in the context of calculating damages as well as in assessing the fairness of the settlement.
Appellant Hutchinson argues that the District Court erred in when it certified a single class including both fixed co-pay consumers and out-of-pocket consumers. According to Hutchinson, because fixed co-pay consumers suffered no injury or did not suffer the same injury as out-of-pocket consumers whose economic loss varied with the conduct of DuPont, the District Court should either have excluded fixed co-pay consumers from the class or otherwise created a separate sub-class for them. We disagree. As the District Court noted, fixed co-pay consumers did possess viable equitable and common law claims for unjust enrichment as well as claims for injunctive relief against DuPont. Fixed co-pay consumers therefore suffеred a cognizable injury as a result of DuPont's allegedly unlawful conduct and posed the same risk to DuPont as did out-of-pocket consumers. Thus, the District Court did not err when it included fixed co-pay consumers with out-of-pocket consumers in the same class.
Finally, several Appellants object to the inclusion of TPPs in the certified class on the grounds that TPPs did not have standing to assert antitrust claims, or in the alternative that their claims were not as strong as those of the consumer plaintiffs. Despite Appellants' objections, we find no error in the inclusion of TPPs in the certified class. Notably, TPPs, like individual consumers, suffered direct economic harm when, as a result of DuPont's alleged misrepresentations, they paid supracompetitive prices for Coumadin instead of purchasing lower-priced generic warfarin sodium. Thus, this case is distinguishable from other product liability class actions, such as Steamfitters Local Union No. 420 Welfare Fund v. Philip Morris, Inc.,
These cases, as with other similar product liability cases, involved class action claims by consumers who had suffered physical injuries from defective products, which in turn resulted in increased medical costs of covered insureds and increased payments by TPPs. The injuries suffered by TPPs in those cases, unlike the direct and independent harm suffered by TPPs in this matter, were derivative of and dependеnt on the harm suffered by consumers. Moreover, we note that the Second Circuit, in reversing the district court's decision in Rezulin, recently held that when insurance companies "allege an injury directly to themselves" and "the damages-the excess money plaintiffs paid defendants for the Rezulin that they claim they would not have purchased but for Defendant's fraud-were in no way derivative of damages to a third-party," the insurance companies have standing to directly sue defendants. See Desiano v. Warner-Lambert Co.,
2. Typicality
The District Court found that the proposed class satisfied the requirements of Rule 23(a)(3), which requires that the claims of the named class representatives be "typical of the claims ... of the class." Fed.R.Civ.P. 23(a)(3). The typicality requirement "is designed to align the interests of the class and the class representatives so that the latter will work to benefit the entire class through the pursuit of their own goals." Id. However, typicality, as with commonality, does not require "that all putative class members share identical claims." Id.
We find no error in the District Court's determination. Notably, the claims of the representative plaintiffs arise from the same alleged wrongful conduct on the part of DuPont, specifically the alleged misrepresentation and deception regarding the equivalence of generic warfarin sodium and Coumadin. The claims also arise from the same general legal theories. As the District Court noted, the one obvious difference among the various class members is that some are consumers and some are TPPs. However, the named class representatives include members from each group. Accordingly, the District Court did not abuse its discretion in finding that Rule 23's typicality requirement was satisfied.
3. Adequacy of Representation
Rule 23 also requires that the representative class members "fairly and adequately protect the interests of the class." See Fed.R.Civ.P. 23(a)(4). We have previously noted that the adequacy inquiry under Rule 23 "has two components designed to ensure that absentees' interests are fully pursued." See Georgine v. Amchem Prods., Inc.,
Admittedly, as the District Court noted, class counsel could have more skillfully defined the class to recognize the differences between the various groups included within the class. However, we reject Appellants' contention that the interests of the class members were in conflict in such a way that the District Court abused its discretion in certifying a single class including several types of injured plaintiffs. As the District Court found, the named parties, who included consumers and TPPs, as well as consumers from the indirect purchaser states, all shared the same goal of establishing the liability of DuPont, suffered the same injury resulting from the overpayment for warfarin sodium, and sought essentially the same damages by way of compensation for overpayment. More importantly, contrary to Appellants' suggestion, the inclusion of fixed co-pay consumers and TPPs neither prejudiced out-of-pocket consumers nor reduced their settlement fund recovery. All class members had the opportunity to recover 100% of their "Recognized Loss,"13 and recovery did not change depending on the number of people in the class, thereby creating the problem of "splitting the settlement." Although some courts have created subclasses of class action plaintiffs where there are conflicts of interest among class members, see, e.g., Davis v. Weir,
Moreover, we agree with the District Court that any potential for conflicts of interest between and among consumers and TPPs that may have arisen prior to and during the settlement negotiations were adequately represented by the presence of separate counsel for consumers and TPPs. The existence of separate counsel, as well as the operation of the Executive Committee, provided adequate "structural protections to assure that differently situated plaintiffs negotiate for their own unique interests." Georgine,
4. Superiority Requirement
Rule 23(b)(3) requires that "a class action [be] superior to other available methods for the fair and efficient adjudication of the controversy." Fed.R.Civ.P. 23(b)(3). The Rule sets out several factors relevant to the superiority inquiry.16 The superiority requirement "asks the court to balance, in terms of fairness and efficiency, the merits of a class action against those of alternative available methods of adjudication." Prudential,
Notably, there are a potentially large number of class members in this matter, including some 2 million consumers and potentially thousands of TPPs. However, individual consumer class members have little interest in "individually controlling the prosecution or defense of separate actions," Fed.R.Civ.P. 23(b)(3)(A), because each consumer has a very small claim in relation to the cost of prosecuting a lawsuit. Thus, from the consumers' standpoint, a class action facilitates spreading of the litigation costs among the numerous injured parties and encourages private enforcement of the statutes. See General Motors,
Moreover, there were a relatively small number of individual lawsuits pending against DuPont in this matter, which indicated to the District Court that there was a lack of interest in individual prosecution of claims. See Prudential,
B. Fairness of the Class Action Settlement
A class actiоn may not be settled under Rule 23(e) without a determination by the district court that the proposed settlement is "fair, reasonable and adequate." General Motors,
This Court has identified nine factors to be considered when determining whether a proposed class action settlement is fair, reasonable and adequate. See Girsh v. Jepson,
(1) The complexity, expense, and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.
Girsh,
Before turning to the District Court's application of the Girsh factors, we resolve a challenge raised by Appellants as to whether the proposed settlement is entitled to a presumption of fairness. We have previously directed a district court to apply an initial presumption of fairness when reviewing a proposed settlement where: "(1) the settlement negotiations occurred at arm's length; (2) there was sufficient discovery; (3) the proponents of the settlement are experienced in similar litigation; and (4) only a small fraction of the class objected." Cendant,
We now turn to the Girsh factors, keeping in mind the heightened standard we use when reviewing the fairness of a settlement that results from negotiations that preceded formal class certification, as well as the initial presumption of fairness that the District Court found attached to the proposed settlement. For the reasons discussed below, we conclude that the District Court did not abuse its discretion in determining that the settlement was fair.
1. Complexity, Expense, and Likely Duration of Litigation
The first factor "captures the probable costs, in both time and money, of continued litigation." Cendant,
2. The Reaction of the Class to the Settlement
The second Girsh factor "attempts to gauge whether members of the class support the settlement." Prudential,
In addressing this second Girsh factor, we consider a related argument raised by one of the Appellants. Hutchinson argues that the lack of consumer objectors resulted from inadequate notice to the consumers, as compared to the notice provided to TPPs. Rule 23(c)(2) specifies that all members of the class should receive "the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." The District Court determined that this requirement was satisfied by publishing summary notice in publications likely to be read by consumer claimants along with a call-center and a website with information and downloadable forms. Hutchinson, however, argues that notice to consumer plaintiffs was inadequate in this case as compared to other large class action suits where individual direct mailing was used. See, e.g., In re Lorazepam & Clorazepate Antitrust Litig.,
However, even in the absence of any individual notice via direct mail in this matter, we are satisfied that the District Court acted within its discretion in determining that "reasonable effort" was made here to provide "the best noticе practicable under the circumstances." See Fed.R.Civ.P. 23(c)(2). In particular, we note that neither the plaintiffs nor DuPont had access to the names and addresses of the multitude of people nationwide who purchased Coumadin because the identity of pharmaceutical purchasers is confidential information that cannot be disclosed without patient consent. In addition, we note that consumers in this case who contacted the administrator or visited the website could request a copy of the notice by direct mail.
3. Stage of Proceedings and Amount of Discovery Completed
The third Girsh factor "captures the degree of case development that class counsel [had] accomplished prior to settlement. Through this lens, courts can determine whether counsel had an adequate appreciation of the merits of the case before negotiating." Cendant,
4. & 5. Risks of Establishing Liability and Damages
These factors survey the potential risks and rewards of proceeding to litigation in order to weigh the likelihood of success against the benefits of an immediate settlement. Cendant,
6. Risks of Maintaining Class Action Status Through Trial
Because "the prospects for obtaining certification have a great impact on the range of recovery one can expect to reap from the [class] action," General Motors,
7. Ability to Withstand Greater Judgment
The seventh Girsh factor considers "whether the defendants could withstand a judgment for an amount significantly greater than the [s]ettlement." Cendant,
8. & 9. The Range of Reasonableness of Settlement in Light of Best Possible Recovery and All Attendant Risks of Litigation
The last two Girsh factors evaluate whether the settlement represents a good value for a weak case or a poor value for a strong case. The factors test two sides of the same coin: reasonableness in light of the best possible recovery and reasonableness in light of the risks the parties would face if the case went to trial. Prudential,
Plaintiff's expert, Dr. French, estimated recoverable damages to be as low as $7.1 million and as high as $133.8 million. The District Court described the methodology utilized by Dr. French tо arrive at those figures and concluded his estimate was reasonable.17 Appellant Hutchinson now claims, without the support of expert evaluation, citation, or discovery, that maximum damages in this case should have been estimated at $400 million since DuPont made $1.6 billion in sales between 1997 and 1999, and there was a 25% difference in cost between generic warfarin sodium and Coumadin. The District Court, after reviewing the expert report and supporting materials, concluded that Dr. French's estimate of the range of possible damages was reasonable if the case were to go to trial.
Based on the $400 million figure, Hutchinson argues that consumers only received 11% of total economic damages, well below the 30%-70% damages recovered in similar pharmaceutical industry class actions. According to Dr. French's figures, however, the $44.5 million settlement fund is approximately 33% of available damages and well within a reasonable settlement range when compared with recovery percentages in other class actions. See Cendant,
On balance, and in light of the presumption of fairness thаt attaches to the settlement, we find that the District Court adequately addressed the Girsh factors, properly discharged its fiduciary duty to absent class members, and did not abuse its discretion in finding the settlement to be fair and reasonable.
C. Plan of Allocation
Several Appellants object to the proposed allocation of settlement funds under the Plan of Allocation. These arguments overlap substantially with those made with respect to class certification, but to the extent that they were not addressed in our discussion above in Part A, we address them here. These additional arguments can be characterized into two groups, those objecting to the inclusion of TPPs in the Plan of Allocation and those objecting to the inclusion of fixed co-pay consumers in the Plan of Allocation.
With regards to the first contention, several Appellants argue, despite the fact that the District Court noted the priority being given to individual consumers in the structure of the settlement, that the settlement is unfairly skewed in favor of TPPs. Although TPPs are certainly receiving a larger percentage of the fund than are consumers, this does not translate into an unfair allocation. As the District Court noted, TPPs paid 67% of Coumadin costs, while consumers paid for 27%, so TPPs actually bear the greater share of damages. Moreover, the District Court stated that the settlement does not favor TPPs. Rather, it is structured to protect consumers and to create an incentive for them to submit claims. The settlement allows individual consumers preferential access to the first 18% of the Net Settlement Fund to satisfy consumer claims before TPP claimants can recover at all, and if consumer claims exceed that amount, the remainder of the 82% of the NSF is shared between TPPs and consumers on a pro rata basis. Because of this favorable allocation, based on the number of consumer claims the Settlement Administrator has received, all consumers who have filed claims can expect to receive 100% of their Recognized Loss, while TPP's will receive only approximately 35.6% of their Recognized Loss. Moreover, we note that had the TPPs or a subclass of consumers not been included in the settlement distribution, the settlement amount would have presumably been significantly smaller as DuPont would still have been vulnerable to claims from excluded purchasers. Consequently, we agree with the District Court that the inclusion of TPPs in the Plan of Allocation was not unfair to individual consumers.
As for the second contention, several Appellants object to the inclusion of fixed co-pay consumers as equal sharers in the proceeds of settlement. However, by participating in the sеttlement, all class members, including consumers with fixed co-pays, are releasing equitable and common-law claims for unjust enrichment seeking disgorgement of profits from wrongdoers, and claims for injunctive relief. Although fixed co-pay consumers have not suffered monetary damages, it is appropriate that they receive consideration for the release of the claims they have against DuPont. Because the Plan of Allocation was agreed to by consumer and TPP class representatives after extensive, arms-length negotiations, and because all consumers who filed claims are likely to receive 100% of their Recognized Losses, the District Court was persuaded that fixed co-pay consumers be allowed to share equally in the distribution of the settlement fund. We find no error in this determination.
III. CONCLUSION
Because the class satisfies the requirements of Federal Rule of Civil Procedure 23 and the settlement is fair to the class, we will affirm the decision of the District Court.
Notes:
Notes
Formerly known as DuPont Merck Pharmaceutical Company (a partnership between E.I. duPont de Nemours & Company and Merck & Company)
Fixed co-pay consumers refer to those insured consumers who paid the same price for prescription drugs regardless of whether the drugs were name-brand or generic. Out-of-pocket consumers refers to individuals who paid different prices for prescription drugs depending on whether they were name-brand or generic. Third Party Payors refer to those entities providing prescription drug coverage and/or paying or reimbursing part or all of the costs of prescription drugs
When seeking approval from the FDA to market generic drugs, drug manufacturers typically submit detailed information regarding the equivalence of the generic version and the previously approved brand name version. Bioequivalence is established by showing that the generic drug delivers to the body the same amount of active ingredient at the same rate and extent as its brand name counterpart. Once bioequivalence is established, and after the FDA approves the manufacturing controls and labeling of the generic substitute, the FDA grants approval for release of the generic drug to the market
"NTI drugs," or Narrow Therapeutic Index drugs, are used for treating severe, life-threatening diseases where a patient's tolerance to the drugs are so narrow that too small a dose can be useless and too large a dose can be dangerous to the patient's health. Warfarin sodium is designated by the FDA as an NTI drug
15 U.S.C. § 26 states in pertinent part: "Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any cоurt of the United States having jurisdiction over the parties, against threatened loss or damage by a violation of the antitrust laws, including sections 13, 14, 18, and 19 of this title, when and under the same conditions and principles as injunctive relief against threatened conduct that will cause loss or damage is granted by courts of equity, under the rules governing such proceedings, and upon the execution of proper bond against damages for an injunction improvidently granted and a showing that the danger of irreparable loss or damage is immediate, a preliminary injunction may issue...."
15 U.S.C. § 2 states: "Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100,000,000 if a corporation, or, if any other person, $1,000,000, or by imprisonment not exceeding 10 years, or by both said punishments, in the discretion of the court."
15 U.S.C. § 15 states in pertinent part: "[A]ny person who shall be injured in his business or property by reason of anything forbidden in the antitrust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respеct to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee...."
Ariz.Rev.Stat. § 44-1401,et seq.; Cal. Bus. & Prof.Code § 17200 et seq.; D.C.Code Ann. § 28-4502, et seq.; Fla. Stat. ch. 401; Kan. Stat. Ann. § 50-101, et seq.; Ky.Rev.Stat. Ann. § 367.110-310, et seq.; La.Rev.Stat. Ann. § 51:137, et seq.; Me.Rev.Stat. Ann. tit. 10, § 1101, et seq.; Mass. Ann. Laws, ch. 93A, et seq.; Mich. Comp. Laws § 445.771, et seq.; Minn.Stat. § 325D.49, et seq.; N.J. Stat. Ann. § 56:9-1, et seq.; N.M. Stat. Ann. § 57-1-1, et seq.; N.Y. Gen. Bus. Law § 340, et seq.; N.C. Gen.Stat. § 75-1, et seq.; N.D. Cent.Code § 51-08.1-0, et seq.; S.D. Codified Laws § 37-1, et seq.; Tenn.Code Ann. § 47-25-101, et seq.; W. Va.Code § 47-18-1, et seq.; Wis. Stat. § 133.01, et seq.
The NSF is to be calculated as follows: $44.5 million plus accrued interest, less court-awarded attorneys' fees, costs and expenses, less costs of notice to class members, less costs of administering the fund, and less taxes
We do not understand Appellants as challenging the District Court's findings that the class satisfied Rule 23(a)'s numerosity requirement
As the District Court noted, in order to prove a violation of § 2 of the Sherman Act, plaintiffs must establish that DuPont possessed monopoly power in the warfarin sodium market and that it willfully acquired or maintained that power as distinguished from achieving growth or development as a consequence of a superior product, business acumen, or historic accidentSee United States v. Grinnell Corp.,
We also note that it appears to be an unsettled question of law as to whether Tennessee's antitrust statutes, the Tennessee Consumer Protection Act ("TCPA") and the Trade Practices Act ("TPA"), cover only violations occurring in intrastate commerce or extend to cover violations occurring in interstate commerce as wellSee FTC v. Mylan Labs., Inc.,
Recognized Loss" refers to total payments made for Coumadin (less the amounts received for reimbursements, discounts, or rebates) multiplied by fifteen percent
Although we find that the District Court was not required to certify subclasses in this matter, we pause to note that subclasses might nonetheless have been usefully employed in this case, and may be so employed in future cases, even in the absence of conflicts, to forestall the particular kind of challenge to certification presented here. Of course, the decision whether to use subclasses is to be made on a case by case basis by the District Court, a determination which we review for an abuse of discretion
Appellant Shapiro also contests the District Court's fee award on the grounds that it exacerbated the intraclass cоnflict between consumers and TPPs. The District Court set aside 22.5% of the total $44 million settlement fund to cover attorneys fees to be divided according to the discretion of the co-chairs of the Executive Committee. The District Court dismissed objections lodged against the award as unpersuasive, explaining that the distribution of an attorney fee award among counsel is and should be a "private matter" for the attorneys to resolve amongst themselvesSee Spicer v. Chi. Bd. Options Exch.,
Rule 23(b)(3) lists the following factors for consideration by the courts:
(A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.
Dr. French's model assumed that, absent DuPont's alleged illegal acts, DuPont's share of the market would have fallen from 100% to 50% from July 1997 to September 1999, that generic warfarin sodium would have cost 25% less than Coumadin, and that DuPont would have charged 2.5% less for Coumadin due to competition from the generic product. Dr. French's floor of $7.1 million resulted from his estimation that DuPont would have vigorously challenged the basis for plaintiffs' damages at trial
Although it is not determinative here, it is also worth noting that while Hutchinson claims the settlement fund amount is too small, every consumer who filed a claim on or before April 30, 2002, will receive 100% of their Recognized Loss